The ACIT, Circle-5, Baroda V. M/s. Mahavir Construction, Baroda

ITA 1803/AHD/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50970 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-11-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 29-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ANIL R SHAH
• Keywords: Bad and doubtful debts; Revenue expenditure

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' BEFORE SHRI G C GUPTA VICE-PRESIDENT AND SHRI A MOHAN ALANKAMONY-AM ITA NO.1803/AHD/2009 WITH C O NO.130/AHD/2009 ASSESSMENT YEAR:-2003-04 THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-5, 5 TH FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA V/S M/S MAHAVIR CONSTRUCTION, 109-110, KARAN COMPLEX, RAJMAHAL ROAD, BARODA PAN: AAEFM 0529 J [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI SAMIR TEKRIWAL, SR. DR ASSESSEE BY:- SHRI ANIL R SHAH, AR DATE OF HEARING:- 15-11-2011 DATE OF PRONOUNCEMENT:- 02-12-2011 O R D E R PER G C GUPTA (VICE-PRESIDENT] :- THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-04 ARE DIRECTED AGAINST THE ORDER OF THE CIT(A). THESE ARE BEING DISPOSED BY THIS CONSOLIDATED ORDER. ITA NO.1803/AHD/2009 [REVENUES APPEAL]:- 2 GROUND NO.1 OF THE APPEAL OF THE REVENUE IS AS UN DER:- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE REPAIR EXPENSE S OF RS.1,75,166/- THOUGH THE PREMISES ARE NOT OWNED BY THE ASSESSEE. 2 3 THE LEARNED DR REFERRED TO THE RELEVANT PORTION O F THE ASSESSMENT ORDER IN SUPPORT OF THE CASE OF THE REVE NUE AND SUBMITTED THAT THE ASSESSEE HAS INCURRED AN EXPENDI TURE ON FLOORING, RACK FOR STORING, REPAIRING AND REPLACEME NT EQUIPMENTS OF GC SHEETS WHICH ARE OF ENDURING BENEFIT AND THER EFORE WERE CAPITAL IN NATURE. HE RELIED ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. SRI MANGAYARKARASI MIL LS P. LTD. [2009] 315 ITR 144 (SC), WHEREIN THE EXPENDITURE FO R REPLACEMENT OF A PART OF THE MACHINE WAS HELD AS CA PITAL IN NATURE AND NOT AN ALLOWABLE EXPENDITURE. HE SUBMITTED THAT THE PREMISES WHERE THE ASSESSEE FIRM HAS UNDERTAKEN THE WORK WAS TAKEN ON RENT FROM ITS OWN PARTNERS. HE RELIED ON THE ORDER OF THE AO. 4 THE LEARNED COUNSEL FOR THE ASSESSEE HAS OPPOSED THE SUBMISSIONS OF THE LEARNED DR. HE SUBMITTED THAT TH E PREMISES OF THE ASSESSEE FIRM WERE RENTED PREMISES AND THE PROV ISIONS OF EXPLANATION TO SECTION 30 WERE INTRODUCED ON THE ST ATUTE BOOK ON A LATER DATE AND WAS NOT APPLICABLE TO THE RELEVANT ASSESSMENT YEAR AND ACCORDINGLY THE EXPENDITURE INCURRED BY TH E ASSESSEE WAS ALLOWABLE AN REVENUE EXPENDITURE. HE RELIED UPO N THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. LAXMI TALKIES 275 ITR 125 (GUJ). 5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULL Y. WE FIND THAT THE PREMISES ON WHICH THE ASSESSEE FIRM H AS INCURRED THE EXPENDITURE ON FLOORING, RACK FOR STORING AND REPAI RING AND REPLACEMENT OF GC SHEETS, ETC. WERE TAKEN ON RENT A ND THE GENUINENESS OF THE TENANCY IN FAVOUR OF THE ASSESSE E FIRM, HAS 3 NEVER BEEN DOUBTED BY THE REVENUE. THE NATURE OF EX PENSES INCURRED BY THE ASSESSEE FOR FLOORING, RACK FOR STO RING, AND REPAIRING AND REPLACEMENT OF GC SHEETS, ETC. AS MEN TIONED BY THE AO IN PARA-5 OF THE ASSESSMENT ORDER ARE NOT OF PER MANENT OR ENDURING NATURE AND DOES NOT CREATE ANY NEW ASSET I N FAVOUR OF THE ASSESSEE. THESE ARE IN THE NATURE OF CURRENT RE PAIRS WHICH ARE REQUIRED FOR PROPER UTILIZATION OF THE PREMISES TAK EN ON RENT BY THE ASSESSEE FIRM AND ARE REVENUE IN NATURE. THE DE CISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. SRI MANGA YARKARASI MILLS P. LTD. (SUPRA), RELIED UPON BY THE LEARNED D R IS DISTINGUISHABLE ON FACTS FOR THE REASON THAT IN THE CASE BEFORE THE HON'BLE SUPREME COURT, THE ASSESSEE HAS INCURRED TH E EXPENDITURE FOR REPLACEMENT OF PART OF TEXTILE MACHINERY FOR SP INNING YARN AND THE REPLACEMENT WAS OF A OLD MACHINE PART WITH A NEW ONE AND IT WAS HELD THAT IT WOULD CONSTITUTE THE BRINGI NG INTO EXISTENCE OF A NEW ASSET IN PLACE OF THE OLD ONE AN D NOT REPAIR OF THE OLD EXISTING MACHINE. IN THE CASE BEFORE US THE EXPENDITURE INCURRED BY THE ASSESSEE HAS NOT CREATED ANY NEW AS SET TO THE ASSESSEE AND WAS IN FACT NECESSARY FOR THE PROPER U TILIZATION OF THE RENTED PREMISES AND ACCORDINGLY WE HOLD THAT TH E SAME WERE ALLOWABLE AS REVENUE IN NATURE AND THE GROUND NO.1 OF THE APPEAL OF THE REVENUE IS DISMISSED. 6 GROUND NO.2 OF THE APPEAL OF THE REVENUE IS AS UN DER:- (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .16,35,000/- BEING BAD DEBTS IN CONTRAVENTION TO THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF DHALL ENTERPRISES & ENGINEERING PVT. LTD. VS. CIT 207 ITR 729. 4 7 THE LEARNED DR HAS RELIED UPON THE ORDER OF THE A O. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE OF CLAIM OF BAD DEBTS IS COVERED IN FAVOUR OF THE ASSESSEE B Y THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AUTOMETERS LTD. [2007] 292 ITR 345 (DELHI) AND ALSO BY THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF T RAVANCORE TEA ESTATES CO. LTD. VS. CIT [1998] 233 ITR 203 (SC ) AND OTHER JUDGMENTS CITED BY THE LEARNED CIT(A) IN HIS ORDER. 8 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULL Y. WE FIND THAT THE ISSUE OF ALLOWABILITY OF BAD DEBTS IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONB LE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GIRISH BHAGWAT PR ASAD 256 ITR 772 (GUJ) AND THE DECISION OF THE HONBLE DELHI HIG H COURT IN THE CASE OF AUTOMETERS LTD. (SUPRA) AND THE DECISIO N OF THE HONBLE APEX COURT IN THE CASE OF TRAVANCORE TEA ES TATES CO. LTD. (SUPRA) AND OTHER DECISIONS OF THE HONBLE COU RTS CITED BY THE CIT(A) IN PARA-6 OF HIS ORDER. THE FACT THAT TH E ASSESSEE HAS WRITTEN OFF THE AMOUNT IN QUESTION AS BAD DEBTS DUR ING THE RELEVANT YEAR IN ITS BOOKS OF ACCOUNT HAS NOT BEEN DISPUTED BY THE REVENUE. IN THESE FACTS OF THE CASE, WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE CONFIRMING THE ORDER OF THE CIT(A). GROUND NO.2 OF THE APPEAL OF THE REVENUE IS DISMISSED. C.O.NO.130/AHD/2009 (ASSESSEES C.O.) :- 9 CROSS OBJECTION NOS.1 AND 2 OF THE ASSESSEE ARE A S UNDER:- 1. THE LEARNED CIT(A) HAS KEEPING IN MIND THE FACTS OF THE CASE AS PER PROVISIONS OF LAW HAD RIGHTLY DELETED THE FOLLO WING ADDITIONS MADE BY THE ASSESSING OFFICER. 5 1. DISALLOWANCE OF REPAIRS TO RENTAL PREMISES OF RS.1,78,166/-. 2. DISALLOWANCE OF BAD DEBT OF RS.16,35,000/-. 2 THE LEARNED CIT(A) HAS PASSED A WELL REASONED AN D A SPEAKING ORDER AND AFTER CONSIDERING THE SUBMISSIONS OF THE ITO BOTH IN THE ASSESSMENT ORDER AS WELL AS IN HIS REMAND REPORT HA S DELETED THE ABOVE REFERRED ADDITIONS AND THEREFORE YOUR RESPOND ENT SUBMIT THAT THE APPEAL FILED BY THE DEPARTMENT BE CONSIDERED AS INFRUCTUOUS AND BE DISMISSED. 10 THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THESE CROSS OBJECTIONS OF THE ASSESSEE ARE MERELY SUPPORT IVE TO THE ORDER OF THE CIT(A) AND MAY BE DECIDED ACCORDINGLY. THE LEARNED DR SUBMITTED THAT THESE CROSS OBJECTIONS ARE INFRUC TUOUS BEING COVERED BY THE REVENUES APPEAL PREFERRED SEPARATEL Y. 11 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE IS SUES RAISED IN THE CROSS OBJECTIONS NOS. 1 & 2 OF THE ASSESSEE BEING MERELY SUPPORTIVE TO THE ORDER OF THE CIT(A), ARE INFRUCTU OUS AND ARE DISMISSED ACCORDINGLY. 12 CROSS OBJECTIONS NOS. 3 AND 4 OF THE ASSESSEE AR E AS UNDER:- 3. WITHOUT PREJUDICE TO ABOVE YOUR RESPONDENT SUBMI T THAT THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE APPLICABI LITY OF SECTION 40A(2)(B) WHICH IS NOT APPLICABLE ON THE FA CTS OF THE CASE AND AS PER PROVISIONS OF LAW. IT IS FURTHER SUBMITTED THAT INTEREST PAID @T 24% W AS FAIR AND REASONABLE AND CIT(A) RESTRICTING SUCH INTEREST @ 2 1% AMOUNTS TO GIVING HALFHEARTED RELIEF WHICH IS WITHOUT ANY P ROOF OR EVIDENCE AND ON ESTIMATE AND THEREFORE IT IS SUBMIT TED THAT THE INTEREST PAYMENT OF 24% BE ALLOWED AS CLAIMED. 6 4. THE LEARNED CIT(A) HAS ERRED IN RESTRICTING THE CLAIM OF ALLOWANCE OF VEHICLE EXPENSES AT 15% INSTEAD OF 20% DISALLOWED BY THE ASSESSING OFFICER. CIT(A) OUGHT T O HAVE HELD THAT THE ENTIRE EXPENSES OF RS.9,03,5387- IS WHOLLY AND FULLY INCURRED FOR PURPOSE OF BUSINESS AND SINCE THERE IS NO ELEMENT OF PERSONAL OR NON BUSINESS NATURE OF EXPENSES TO CIT( A) OUGHT TO HAVE DELETED THE FULL DISALLOWANCE. 13 THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PRE SSED THESE CROSS OBJECTIONS AND ACCORDINGLY CROSS OBJECTION NO S. 3 AND 4 OF THE ASSESSEE ARE DISMISSED. 14 IN THE RESULT, BOTH THE APPEAL OF THE REVENUE AN D THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 02-12-2011 SD/- SD/- (A MOHAN ALANKAMONY) ACCOUNTANT MEMBER (G C GUPTA) VICE-PRESIDENT DATE : 02-12-2011 COPY OF THE ORDER FORWARDED TO: 1. M/S MAHAVIR CONSTRUCTION, 109-110, KARAN COMPLEX , RAJMAHAL ROAD, BARODA 2. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-5, 5 TH FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA 3. CIT CONCERNED 4. CIT(A)-V, BARODA 5. DR, ITAT, AHMEDABAD BENCH-B, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD